Exercise 20 19 Error correction inventory error LO20 6 During 2018, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts 2016 understated by $ 146,000 2017 overstated by 202,000 WMC uses the periodic inventory system and the FIFO cost method Required 1 a Determine the effect of 2016 errors on retained earnings at January 1, 2018, before any adjustments (Ignore income taxes ) 1 b Determine the effect of 2017 errors on retained earnings at January 1, 2018, before any adjustments (Ignore income taxes ) 2 Prepare a journal entry to correct the error made in 2017 Req 1A 2016 2016 effect on 2017 Beginning inventory Beginning inventory Plus net purchases Plus net purchases Less ending inventory Less ending inventory Cost of goods sold Cost of goods sold Revenues Revenues Less cost of goods sold Less cost of goods sold Less other expenses Less other expenses Net income Net income Retained earnings Retained earnings Req 1B 2017 Beginning inventory Plus net purchases Less ending inventory Cost of goods sold Revenues Less cost of goods sold Less other expenses Net income Retained earnings Req 2 Prepare a journal entry to correct the error made in 2017 (If no entry is required for a transaction event, select No journal entry required in the first account field ) Record correction of error

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Exercise 20-19 Error correction; inventory error [LO20-6] During 2018, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the

Exercise 20-19 Error correction; inventory error [LO20-6]

During 2018, WMC Corporation discovered that its ending inventories reported on its financial statements were misstated by the following amounts:


2016	understated by	$	146,000
2017	overstated by		202,000

WMC uses the periodic inventory system and the FIFO cost method. Required: 1-a. Determine the effect of 2016 errors on retained earnings at January 1, 2018, before any adjustments. (Ignore income taxes.) 1-b. Determine the effect of 2017 errors on retained earnings at January 1, 2018, before any adjustments. (Ignore income taxes.) 2. Prepare a journal entry to correct the error made in 2017.

Req 1A

2016		2016 effect on 2017
Beginning inventory		Beginning inventory
Plus: net purchases		Plus: net purchases
Less: ending inventory		Less: ending inventory
Cost of goods sold		Cost of goods sold

Revenues		Revenues
Less: cost of goods sold		Less: cost of goods sold
Less: other expenses		Less: other expenses
Net income		Net income

Retained earnings		Retained earnings

Req 1B

2017
Beginning inventory
Plus: net purchases
Less: ending inventory
Cost of goods sold

Revenues
Less: cost of goods sold
Less: other expenses
Net income

Retained earnings

Req 2

Prepare a journal entry to correct the error made in 2017. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)